Ah yes, that age-old, “You can use numbers to say anything you want” line that I love so much!

I experienced this first-hand on Tuesday as I spoke to a prospective home-buyer on the phone about his housing search.

The conversation was amicable, don’t get me wrong.  He chuckled as we exchanged barbs.

He contends that “the market is down” because he has some hand-selected figures from the TREB archives, ie. the average detached home price in the 416 this past month, $1,323,015, is still 16.1% behind the peak detached home price in April of 2017, which was a whopping $1,578,542.

I contend that “the market is up,” if not for just simple, common-sense, then because the 416 HPI of $897,200 is up by 9.8% since April of 2017, which checked in at $817,000.

He contended that this new listing for a detached home in Riverdale was “worth” $200,000 below the list price.

I pleaded with him to understand that this new listing would sell for $200,000 above the list price.

I offered that perhaps he was so blinded by his wishful thinking, and dare I say, possessing just a little bit of jealousy and regret, that he was going to cling to the statistics that backed up his hopes and dreams.  But that’s like listening to your mother when she says, “You’re the most handsome boy in the school and all the girls are going to love you!”

TREB stats are both a blessing and a curse because the numbers themselves tell only half the story; it’s the interpretation that tells the second half.  And that interpretation varies, depending on who is telling the story.

We can take any stance on the market with the numbers we’re given, and every month, I try to look at the TREB numbers to see what jumps out at me the most without coming into the task with any preconceived notions.

It’s true, we usually look at price first.

Recall my blog post from last month, which you can read HERE, where I used the previous decade’s data in May and October to try to forecast the price for October of 2019, as follows:

Folks, this exercise proved accurate!

The average home price in October, as mentioned, was $852,142.  The forecasted price was $855,762.

These numbers are within one-half of one-percent of each other.

Not bad!

I also predicted in my August e-Newsletter that the average Toronto home price would push past $840,000 by the end of October, so I’m pleased to see that I have a feeling for the market.

The media take on this month’s numbers is debatable.

Here’s the top story when I look at “Toronto real estate” on Google:

What does this say?

Is it simply a statement that the average house price is as high as it’s been since 2017?

Or is it somehow inferring trouble, by referencing the “market peak?”

I will give the media credit – they’re not as negative as they were in years past.  When the market was bleak in May of 2017, they wanted stories about blood in the streets.  But even when the market was red-hot earlier that year, or the fall of 2016, the stories still seemed to be painting the real estate market with a negative brush, as if to say, “The market is hot, but this isn’t good for Torontonians.  Look at this person, or this condo, or this house.  Look how tough it is.  Look how sad people are.”

Just tell the damn story, honestly.

The average home price of $852,142 is interesting, but I’m actually less interested in the price than I am in the sales volume and inventory levels.

This is where I feel we can look for answers as to why prices continue to rise, from the spring, through the fall, as well as look for indicators as to what we can expect moving forward.

In last month’s blog, we looked at the relationship between average home prices in the two peak months of the fall market: September and October.

I’ll re-run that graphic now, adding in 2019:

As I mentioned last month, if I were asked in how many months is the October average sale price higher than the September average sale price, I certainly would not have guessed, “every single month in the last decade.”

But this is the trend in the fall market, and when you see something happen in 9/9 previous years, it’s pretty easy to predict that it will happen again this year.

With a 1.1% increase in the average home price this October over September, the Toronto real estate market is behaving exactly as we would expect it to.

But what about sales?

Sales were up 14%, year-over-year, from 7,448 in October of 2018 to 8,941 this past October.

Is this significant?

I suppose in order to answer that question, we’d have to look at inventory numbers as well.  After all, is price not a function of supply and demand?

We need to look at the “Sales to New Listings Ratio,” or SNLR.

Here’s the chart from last month, regarding September:

These numbers are not going to have any real meaning to you, on their own.

But what if we look at the SNLR and compare to October?

This might shed some light on the relationship between sales and inventory as the fall market wears on.

Let’s run the same figures for October:

What should stand out here is how much higher the SNLR is for October than November.

Every single month shows a much, much higher figure than in September.

Now why is this?

Here’s where things get really interesting, if you’re a stats nerd like me!

There are, in theory, three things that could happen to see a tightening market, or an increase in SNLR:

a) Higher Sales
b) Lower Inventory
c) Both

Which do you think it is?

Well, first, let’s look at sales in the months of September and October:

Very, very interesting!

In nine years, we’ve only seen sales in September trump that of October once.

On average, sales are 7.8% higher in October than September during this time period.

The “big” jump in sales this month, from 7,825 in September to 8,491 in October, represents an 8.5% increase.  But that pales in comparison to last year when sales increased 16.1%!  Or even the year before, in what was a really odd 2017 market, when sales still jumped 11.6%.

I’ll be honest, this surprised me.  September is such a busy month, and I’m downright shocked to see 8/9 sales figures being higher in October than September.

Alright, so now what then of inventory?

Let’s look at new listings during the same time period:

Did you expect this?

I sure did not.

New listings are down every single October, over September, for nine years running.

And we’re not talking a modest drop, either.  We’re averaging 12.8%

So now let’s put this together.

On average, there are 7.8% more sales in October than in September.

On average, there are 12.8% fewer listings in October than in September.

Is this not a recipe for disaster in any market?

How in the world is average price ONLY up 1.1%, month-over month?

The crazy thing is, folks, if you think the SNLR looks tight as we move from September to October, just look at the three fall months put together:

A few notes about this data…

Months in which SNLR is higher in October than September: 9 of 9.

Months in which SNLR is higher in October than September: 8 of 8.

Average increase in SNLR from September to October: 11.6% per month.

Average increase in SNLR from October to November: 8.5% per month.

Those last two stats introduce a concept we all learned in Grade-12 economics: diminishing returns.

Seeing the SNLR increase by 11.6% on average, then 8.5% on average, from September, to October, to November, shows us the market gets tighter, but does so at a decreasing rate.

To be blunt, this data should tell would-be home-buyers one thing for certain: it’s going to be really, really tough out there this month.

If history is any indication, the SNLR in November is going to be somewhere in the 70-75% range, which is just brutal for buyers.  Limited inventory from which to choose, and frenetic competition.  That’s a recipe for frustration, and while it’s not going to result in an increase in the average home price, I do believe there will be property types and geographic locations within the central core that will see prices rise through to the end of the month.

Perhaps we can make this a regular theme from now on.  Instead of looking at the numbers to see what the market did, we can use the numbers to try to predict what the market will do.  Easy, right?

Sure.  While we’re at it, who’s going to win the Super bowl?  I’ve got the New Orleans Saints.  You heard it here first…